What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: July 28, 2020

Chicago-based securities law firm Stoltmann Law Offices continues to represent investors nationwide in claims involving bogus tax-shelter investments like syndicated conservation easements. One of the most troublesome products sold by brokers in recent years have been vehicles that offer investors substantial tax breaks that skirt the US tax code. Although the promise of reducing taxes is always a powerful incentive for high net-worth investors, the vehicles themselves may not be allowed by the Internal Revenue Service (IRS) or Tax Courts. The IRS can be ruthless and unforgiving and an investor invested in a “tax shelter” that the IRS determines lacks legitimacy, it is the investor that will owe every nickel of those tax savings back, plus penalties and possible criminal prosecution. It can be a scary and expensive situation.

Syndicated conservation easements offer buyers generous tax deductions for donating property for conservation purposes. Although mostly done by landowners for ecological preservation and restoration, brokers have “bundled” these vehicles to sell them to unsuspecting clients, who buy them thinking they will be gaining outsized tax write-offs. Last year, the IRS announced that it would step up enforcement on these vehicles, which it included in its “Dirty Dozen” list of abusive tax scams to avoid. Two years ago, the U.S. Department of Justice shut down a Georgia-based firm marketing these schemes.

The way a conservation easement scheme works is initially based on a legitimate tax write-off. Say you have a piece of property that has some significant ecological or preservation value. Under IRS rules, you can directly donate the real estate by placing it in a land trust or gift it to a charity, ensuring that it won’t be developed in perpetuity. If it’s a legitimate transaction, you can take a write-off based on the fair value of the land.

But easement promoters aggressively exploit these vehicles and started pitching and bundling them to investors, grossly inflating the value of the land – and the subsequent tax deduction — which is illegal. The IRS caught up with the practice and started cracking down on the syndicated sales, winning several cases in Tax Court, claiming that the vehicles were illicit tax shelters. The agency then started an aggressive enforcement campaign.

One of the ways the tax scam promoters ensnare investors is that they pump up the value of the properties being donated. “The IRS has seen abuses of this tax provision that compromise the policy Congress intended to promote,” the agency states.  “We have seen taxpayers, often encouraged by promoters and armed with questionable appraisals, take inappropriately large deductions for easements. In some cases, taxpayers claim deductions when they are not entitled to any deduction at all (for example, when taxpayers fail to comply with the law and regulations governing deductions for contributions of conservation easements). strict rules on appraisals, which the promoters ignored.”

The IRS recently offered a settlement to individuals who had invested in the easement scams that had gone to Tax Court. Although the agency will continue to track down promoters, investors who have been sold these schemes can file arbitration cases against brokers. In the interim, the IRS said it’s going to be aggressive in rooting out the marketing of the scams.

“We will not stop in our pursuit of everyone involved in the creation, marketing, promotion and wrongful acquisition of artificial, highly inflated deductions based on these aggressive transactions,” said IRS Commissioner Chuck Rettig in a statement last year. “Every available enforcement option will be considered, including civil penalties and, where appropriate, criminal investigations that could lead to a criminal prosecution,” Rettig added.


“The IRS will continue to actively identify, audit and litigate these syndicated conservation easement deals as part of its vigorous and relentless effort to combat abusive transactions,” said Rettig. “These abusive transactions undermine the public’s trust in private land conservation and defraud the government of revenue. Ending these abusive schemes remains a top priority for the IRS.”

If you invested in a conservation easement recommended to you by your financial advisor, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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